Mortgage Knowledge Saves Money

By Marcus McCue, vice president of Guardian Mortgage Co. Inc.

In the past few years, many consumers have paid dearly for what they did not know about the mortgage industry. There are new rules designed to protect consumers that you need to know about even if this is not your first home buying experience.

Regulations from the new Consumer Financial Protection Bureau’ affecting how mortgage brokers and lending officers are paid went into place in April. The premise of the compensation change is sound, which is to ensure the mortgage loan officer is paid a set amount related to whether the loan can be approved and closed, not on the size or interest rate of the loan.

Loan officers cannot increase the fees or rate for a low-loan amount borrower or a low-credit score borrower. East Dallas homebuyers whose loans take more effort or who fall into these categories benefit greatly from this situation.

Ironically, the many industry experts predicted that unintended consequences of these regulations could make the situation difficult for homebuyers in three ways:

  1. Smaller broker operations may go out of business, thus reducing lending options;
  2. Some brokers and lenders will stop servicing “difficult” loans since they are no longer compensated for the extra effort;
  3. Since brokers can’t bury their commissions in the loan fees anymore, they will likely charge more than lenders, and;
  4. With less competition, rates will likely rise.

Current economic conditions have kept mortgage rates low, so these fears of higher mortgage rates have not materialized. However, many local brokers have ceased operation and others are certainly shying away from the loans that could be “difficult” or time consuming to originate due to complex income or credit situations.

How can you make sure you get the best loans for your situation in this new environment?

  • Get pre-approved for the loan before house hunting not just pre-qualified. You want to work through any challenges in your lending situation ahead of time.
  • Have the broker or lender go over every line of the Good Faith Estimate with you until you understand it. Despite new rules designed to clarify the GFE and make like-to-like comparisons possible, it can still be very confusing.
  • Ask where fees/compensation might be hidden or “relocated” on the GFE so you can ask your lender the right questions and make clear comparisons.
  • Talk to a knowledgeable, experienced loan originator about different loan types and nuances before finalizing negotiations with the seller. There are many ways to structure a deal of which the general consumer is not — nor many realtors — aware.
  • Be sure to talk to a lender as well as a broker as fees may be quite different. Admittedly I’m biased saying this, but lenders like Guardian Mortgage Co. have no problem adjusting to the compensation changes because our compensation model already was different from brokers.
  • Shop for a finance partner that is known for its customer service and experienced loan originators — especially if your situation may take additional effort.
  • Make sure the lender services its own loans — you will get better service before, during, and after the loan closes

Marcus McCue is vice president of sales for Guardian Mortgage, which has financed many East Dallas homes. He enjoys mentoring homebuyers to become smart borrowers. Follow Guardian on Facebook for a free e-book on mortgage strategies.

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